Flat Ownership and extending lease terms
Did you know that you may be able to extend the term of your lease which may make it easier to sell?
Almost all flats in England and Wales are leasehold and as a leaseholder (i.e. a Tenant under a long lease) you have purchased a “diminishing asset” as the lease will have been granted for a fixed term. The most common are terms granted for either 99 or 125 years. The issue is therefore that many leases that were granted in for example the 1970s have less than 60 years left on the term and the majority of mortgage lenders will only accept a minimum unexpired term – usually around 70 years from the date of the mortgage. So this short term can make it difficult for buyers to get their mortgage.
All is not lost, as in the right circumstances you will be entitled to extend your lease by 90 years (and at the same free yourself from ground rent payments) using a legal process governed by the Leasehold Reform, Housing and Urban Development Act 1993. In return you will need to pay a premium to the freeholder. Bear in mind that the actual number of years you have left to run on your lease can significantly affect the price that you pay (and less than 80 years is a ‘key’ date).
So do you qualify? You will need to:-
• Have owned the flat for at least 2 years (unless you are a personal representative of a leaseholder who qualified); and
• Have a lease that was granted for at least 21 years or more; but
• It does not matter whether you actually live in the flat.
If you qualify then there is a fixed procedure that you must follow in order to successfully claim and that includes various timescales that must complied with. The Landlord is entitled to ask a valuer to work out how much the Premium should be and you have to reimburse the Landlord for that along with his legal fees.
Q: I am applying for a new Lease under the 1993 Act, will it be on the same terms as my current lease?
A: Generally yes, save for two key changes:
• The new term will be for 90 years expiring after the date of the expiry of the original term; and
• The new ground rent will be a nominal ‘peppercorn’
Danii Jhurry-Wright, partner, commercial department.Residential Property Conveyancing